Accounting › Section U · Standard costs and variances › Topic U.5
How companies use variance analysis
Computing variances is arithmetic; using them well is management. This topic shows how companies report variances, decide which ones to investigate, trace their causes and avoid the behaviour that standards can encourage.
In this topic
- From numbers to decisions
- The variance report
- Management by exception
- Worked example: applying Pellworth's thresholds
- Linked causes
- Worked example: tracing March's story
- When standards drive the wrong behaviour
- Closing variances at period end
- Strengths and limits of standard costing
- Common mistakes to avoid
- Key takeaways
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